EAST PENN RAILROAD, L.L.C.--LEASE AND OPERATION EXEMPTION--NORFOLK SOUTHERN RAILWAY COMPANY

Decision Type: &nbsp

Decision

Deciding Body: &nbsp

Entire Board

Decision Summary

Decision Notes: &nbsp

DECISION REVOKED THE DELEGATION OF AUTHORITY TO THE DIRECTOR OF PROCEEDINGS, UNDER 49 C.F.R. § 1011.7(a)(2)(x)(A), TO DETERMINE WHETHER TO ISSUE A NOTICE OF EXEMPTION IN THIS PROCEEDING AND DETERMINED THAT THE NOTICE SHOULD BE ISSUED.

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Full Text of Decision

35729

41752SERVICE DATE – JULY 15, 2011

EB

SURFACE
TRANSPORTATION BOARD

DECISION AND NOTICE

Docket No. FD 35533

EAST PENN RAILROAD, L.L.C.–LEASE
AND OPERATION EXEMPTION–NORFOLK SOUTHERN RAILWAY COMPANY

Decided:July 12, 2011

BY THE BOARD:

Under 49 C.F.R.
§ 1011.7(a)(2)(x)(A), the Director of the Office of
Proceedings (Director) is delegated the authority to determine whether to issue
notices of exemption for lease transactions under 49 U.S.C. § 10902.However, the Board reserves to itself the
consideration and disposition of all matters involving issues of general
transportation importance.See 49 C.F.R.
§ 1011.2(a)(6).Accordingly, the Board is revoking the delegation to the Director with
respect to the issuance of this notice of exemption.The Board has determined that this lease and
operation notice of exemption should be issued, and does so here.

Notice

East Penn Railroad,
L.L.C. (ESPN), a Class III rail carrier, has filed a verified notice of
exemption under 49 C.F.R. § 1150.41 to lease from Norfolk Southern Railway
Company (NSR) and to operate approximately 5.2 miles of rail line in York, Penn.[1]Pursuant to the lease agreement, ESPN will lease:
(1) the York Industrial Track between
milepost YR 7.50 and YR 12.31 (4.81 miles in length); and (2) the Wye Track between milepost YR 12.31 and milepost 12.70
(0.39 miles in length), which connects the York Industrial Track to NSR’s line.[2]

As required under 49 C.F.R. § 1150.43(h),
ESPN has disclosed that the lease agreement between it and NSR contains an interchange
commitment provision that enables ESPN to reduce its lease payments by
receiving a credit for each car interchanged with NSR.ESPN states that NSR initially proposed a
fixed rental payment with no option to reduce the rent, but ESPN requested a
lease credit option to give it an opportunity to earn a lower rental payment, which
would enable it to invest in improvements on the leased lines and thereby increase
traffic levels.According to ESPN, the
interchange point with NSR is York.

ESPN
certifies that the projected annual revenues resulting from the proposed
transaction will not result in ESPN becoming a Class II or Class I rail carrier
and will not exceed $5 million annually.

The
transaction is expected to be consummated on or after July 31, 2011, the
effective date of the exemption (30 days after the verified notice of exemption
was filed).

If the
verified notice contains false or misleading information, the exemption is void
abinitio.Petitions to revoke the exemption under 49
U.S.C. § 10502(d) may be filed at any time.The filing of a petition to revoke will not automatically stay the
effectiveness of the exemption.Petitions for stay must be filed no later than July 22, 2011 (at least 7
days before the exemption becomes effective).

An original and 10 copies of all pleadings, referring to
Docket No. FD 35533, must be filed with the Surface
Transportation Board, 395 E Street, S.W., Washington, DC20423-0001.In addition, a copy of each pleading must be served on Karl Morell, Ball Janik LLP, Suite
225, 655 Fifteenth Street, N.W., Washington, DC20005.

Board
decisions and notices are available at our website at:“WWW.STB.DOT.GOV.”

It
is ordered:

1.The delegation
of authority to the Director of the Office of Proceedings, under 49 C.F.R.
§ 1011.7(a)(2)(x)(A), to determine whether to
issue a notice of exemption in this proceeding is revoked.

I disagree with the Board’s
decision to allow this transaction to be processed under the class exemption
procedures.I would like to have more
information about the likely impact of the proposed interchange commitment
before deciding whether to permit the transaction to go forward.In support of the interchange commitment
provision, ESPN asserts only that it requested a “lease credit” option from NSR
so that ESPN would better be able to invest in line improvements.This generic refrain, which has been used in
a number of recent Board proceedings, sheds no light on whether a provision
discouraging interchange with other carriers is inconsistent with the public
interest in this case.

[1]ESPN has filed a lease agreement and an
interchange agreement under seal pursuant to 49 C.F.R. § 1150.43(h)(1)(ii).

[2]ESPN states that it will also be leasing from
NSR certain real property located under the Wye Track
and a service road extending from Windsor Street.